Small and medium enterprises in Dubai must invest more in innovation or risk losing out to their international competitors, a government report finds.
Only 8 per cent of the 500 businesses surveyed by Dubai SME for its report “The State of Small & Medium Enterprises” said they had an annual budget for conducting research and development (R&D). That compares with 18 per cent in New Zealand and 24 per cent in the United Kingdom, for example.
Overall, however, 13 per cent of the Dubai SMEs surveyed said they had made some kind of innovation regarding product development or process improvement.
Medium-sized firms and those in the manufacturing sector spent more on R&D than those in trading and services.
“In terms of the type of innovation, product innovation seems to be the highest,” said Alexandar Matthew Williams as he presented the report in Dubai on Sunday. “The key objective is to differentiate their products and services from the competition. So these SMEs are the more enlightened ones.”
Dubai’s SMEs also needed to devote more attention to human resources and bookkeeping, the report said. Overall, though, Dubai’s SME economy was “healthy and extremely dynamic” and continues to add significantly to the economy as a whole.
The report, published on Monday, is the first comprehensive analysis of the SME sector in Dubai and the region, said Abdul Baset Al Janahi, the chief executive of Dubai SME.
It provided “a full, detailed perspective of what the sector is all about – where it is growing, the challenges – and this helps us as policymakers, as decision makers, as investors … to know how this works, really, and to know what needs to be done to take it to the next step,” Mr Al Janahi saidy.
SMEs represent 95 per cent of all businesses, by numbers, in Dubai, accounting for 42 per cent of the workforce and generating 40 per cent of the emirate’s income. The report will provide one of the bases of the Dubai SME five-year strategic plan, which is due for publication soon.
The Dubai SME 100 2013 rankings are published alongside the report.
The report is divided into seven main sections, with its bulk devoted to the state and characteristics of Dubai’s SMEs.
Another finding is that Dubai’s SMEs are less productive when compared to large business in Dubai and also to similar-sized firms abroad. This is attributed to the low focus of SMEs on making the business more efficient, limited focus on the training and development of staff, and limited adoption of advanced information and telecoms systems (ICT).
The current state of ICT is “moderate” but this “is set to increase manifold as businesses look to enhance their level of business sophistication”, the report said.
Overall, 27 per cent of SMEs have a dedicated IT employee or department, compared with 20 per cent in the European Union.
About half of Dubai SMEs have a website, but only 6 per cent have online ordering facilities built in to those sites. In the EU and New Zealand, 12 per cent and 31 per cent of firms have a built-in e-commerce function.
Tobias Bessone, the chief executive of Wavetec, an information technology firm, which placed second in the 2013 Dubai SME rankings, said the report had highlighted issues he now intended to address within his firm.
“When we do the budgeting, sometimes we don’t allocate a lot of our expenses properly,” he said, explaining that, for example, cash designated for R&D might be listed under the general technology budget category rather than its own separate category.
He said he also wanted to explore ways the company could develop its human capital.
“That is something we need to understand more,” he said. “What is it? Is is just training? He mentioned stock options for employees. It’s something I now need to investigate more.”